Yokohama, Japan - Nissan is planning to cut about 300 billion yen (R51.8bn) in annual fixed costs as the coronavirus pandemic further depresses the carmaker’s sales, a person with knowledge of the measures said.
Those initiatives are likely part of a three-year plan that will be unveiled along with financial results on May 28, calling for Nissan to take more drastic measures to turn the manufacturer around, said the person, asking not to be identified. The Yokohama-based company will phase out the Datsun brand, shut down one production line in addition to the recently closed operation in Indonesia and reach the reduced spending target this year by cutting marketing, research and other costs, the person said.
Nissan has been in turmoil since the November 2018 arrest of former Chairman Carlos Ghosn, with an aging car lineup and management paralysis denting its outlook. The carmaker warned last month that it expects to post a loss for the latest fiscal year through March, as the pandemic shuttered showrooms in major markets and the economic fallout dented consumer demand for new cars.
The plans still need to be reviewed by Nissan’s board and may change, people privy to deliberations around the restructuring plan said. The scale of the restructuring charge is still being determined as well, they said.
Although Nissan is forecasting a 12 percent decline in sales for the just-ended fiscal year, the new mid-term plan calls for a return to revenue of 11.5 trillion yen within three years, with fixed costs kept at reduced levels, the person said.
A yet-to-be disclosed production line will be shuttered as part of the changes, bringing the worldwide total to 13. That will put Nissan’s utilisation ratio at approximately 80% within three years, the person said, adding that the plan assumes annual output capacity of about 5.4 million cars. Nissan’s utilisation rate was about 65% in the just-ended fiscal year, according to data compiled by Bloomberg. Under the prior mid-term plan, Nissan had planned to reduce capacity to around 6.6 million units per year from 7.2 million.
“Nissan will announce a revised midterm plan along with fiscal year 2019 financial results on May 28,” said Azusa Momose, a spokeswoman for Nissan. “We do not have any further comments on this subject.”
Datsun dropped, but Infiniti to be revitalised
The targets are part of what Nissan’s new executive team, which took over in December, is calling the Operational Performance Plan, replacing measures announced in July.
Some development functions in specific countries, including India, Vietnam and Thailand, are under consideration for streamlining, the people said. The Datsun budget brand, which aimed at developing economies such as South Africa and India, will be phased out as Nissan focuses on its main markets of the US, Japan and China, the source said. As part of the focus on the bigger, wealthier markets, Nissan’s premium Infiniti brand will be revitalised, according to the person.
Among the three regions, China is a bright spot as its economy sputters back to life after shutting down in the early days of the virus outbreak.
For Europe, Nissan will rely on its alliance with Renault, with a focus on selling SUVs and electric cars. Mitsubishi Motors, the third member of the global carmaking alliance, will focus on the markets in Asia where it has a bigger presence.
The alliance was shaken by the arrest of Ghosn, who was also CEO and chairman of the French carmaker. The former auto executive escaped trial in Japan at the end of 2019 and made his way to Lebanon. Ghosn denies the charges of financial misconduct and breach of trust against him, and said that Nissan colluded with prosecutors to remove him in order to prevent further integration with Renault, its biggest shareholder.